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Masayoshi Son’s SoftBank Group has sold its entire stake in Nvidia for $5.8bn as the Japanese company looks for ways to fund its growing investments in artificial intelligence.
SoftBank’s announcement that it had sold 32mn shares of the AI chipmaker last month came as it reported net profit of ¥2.5tn ($16.2bn) in the quarter to the end of September, more than double the same period last year and far above analysts’ expectations of ¥207bn, according to LSEG data.
“This year our investment in OpenAI is large — more than $30bn needs to be made — so for that we do need to divest our existing portfolios,” said SoftBank’s chief financial officer Yoshimitsu Goto on Tuesday. “We did not have a specific [reason to sell] in October and it was nothing to do with Nvidia itself.”
Second-quarter profits were also driven by the group’s tech-heavy Vision Funds, which recorded an investment gain of ¥2.8tn from holdings including ChatGPT maker OpenAI and Japanese payments group PayPay. SoftBank also sold some of its stake in US telecoms operator T-Mobile for $9.2bn.
Nvidia shares were down more than 3 per cent on Tuesday.
Son has bet his reputation on a series of huge investments aimed at turning SoftBank into a critical player in AI — a technology he believes will shape “humanity’s future”.
Alongside his ownership of UK chip designer Arm, Son has invested in cloud software developer Oracle, is supporting the massive Stargate data centre build-out in the US and most recently bought ABB’s robotics arm in a deal valuing the business at $5.4bn.
SoftBank’s shares have more than doubled this year to over ¥22,000 as investors view them as a way to gain exposure to OpenAI, making Son Japan’s richest man.
The company on Tuesday announced a four-to-one stock split that will take effect on January 1, saying it would make the shares “more accessible to investors and further expand its investor base”.
Oliver Matthew, an analyst at CLSA, said SoftBank’s shares still traded at a discount of close to 25 per cent compared with the value of its holdings if OpenAI were to be valued at $1tn. He has a target share price of ¥29,000.
Last month the ChatGPT maker completed a long-awaited restructuring, unlocking a second tranche of investment from SoftBank and the possibility of an eventual public listing. After the reorganisation, SoftBank now owns roughly 11 per cent of OpenAI, compared with Microsoft’s close to 27 per cent.
Other analysts, however, have warned that SoftBank’s valuation might be too high.
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David Gibson at MST Financial downgraded the stock last month on concerns that demand for OpenAI’s ChatGPT might have peaked, and around SoftBank’s funding commitments.
The company can fund its investments this year with cash, debt and some share sales, but the longer-term picture was less clear, Gibson told clients.
“Longer term I estimate [SoftBank] has committed $113bn of investments, but only has funding ability of $58.5bn and hence it has overcommitted,” he wrote, adding that the company might need to tap money from its Vision Funds or “sell down its stakes” in its telecoms operator SoftBank Corporation or Arm to fund its plans.
The “market has ignored this unfunded risk which is ripe for execution problems”, Gibson wrote. “Recent debt issuance at interest rates over 8 per cent suggest the debt market realises this while I think the equity market has not.”